In his New York Times column this morning, Paul Krugman cites a new paper estimating that the failure of our economy to fully recover from the recession is costing us $1 trillion a year. Why? Because:
[O]ur seemingly endless slump has done long-term damage through multiple channels. The long-term unemployed eventually come to be seen as unemployable; business investment lags thanks to weak sales; new businesses don’t get started; and existing businesses skimp on research and development.
Hmm. How much of this loss we can blame on Krugman himself? If we take Casey Mulligan’s estimates, half the excess unemployment is caused by expanded entitlement spending (Food stamps, unemployment compensation, disability, etc.). But who is the nation’s number one advocate for the welfare state? Hint: he writes for the NYT. The uncertainty caused by ObamaCare surely contributes to much of the remaining unemployment. But who is the nation’s most vociferous advocate of ObamaCare? Okay, probably the president. But surely Paul is in second place. And who is the most persistent advocate of other kinds of other regulations that create business uncertainty and impair hiring? It’s hard to give the prize to anyone but Paul.
I can attest from personal conversations that Krugman editorials influence people at Brookings and on Capitol Hill. So I think assigning as little as 1 to 2% of the trillion dollar annual loss to Krugman would actually be a very conservative estimate. The true damage is probably many times that. Anyway, the upshot is that Krugman’s editorials are causing harm to innocent victims.
Economics teaches that one remedy for negative externalities is taxation. However, I’m afraid that the correct Pigouvian tax would wipe Krugman out. It would send him to the welfare office. He would be waiting in line for his next allotment of Food Stamps.
I’m just trying to imagine what that would look like.